Gov. Mark Dayton says the Minnesota Legislature will have to hold a special session if it hopes to get disaster aid to the counties hit hard by this summer’s storms.
“There is no way to avoid a special session,” Dayton told reporters Tuesday. The state cannot divert the funds to the stricken communities without legislative approval, he said.
But before Dayton recalls lawmakers to St. Paul for the proposed Sept. 9 session, he and Republican leaders will have to settle the tax question.
The governor has proposed repeal of one of the new business-to-business taxes the Legislature passed last session -- a tax on farm equipment repairs. Republicans want to use the special session to repeal all the new business-to-business taxes.
Dayton and legislative leaders will meet Wednesday to try to find a way to offset any additional the tax repeals.
“I’ve said to everybody who wants to take one or all of those three taxes, we have to balance the budget and we have to do it honestly,” Dayton said. “If you wanted to eliminate $310 million in revenue for the three (new business-to-business taxes) then you have to tell us where you’re going to raise $310 million of additional revenue or cut $310 million of spending.
“A lot of those who are advocating this, avoid taking responsibility for it,” Dayton added. “Well, I and the legislative leaders have that responsibility. I’ve been asking for six weeks, Republican leaders who have been advocating this: ‘Tell me where you’re going to find the money.’ Maybe we’ll get that tomorrow morning. I hope so, because that’s going to be the heart of it before we go any further.”
The state is putting the brakes, temporarily, on plans for a new $89 million Senate Office Building.
The seven-member selection committee that was reviewing bids from contractors for the project has scrapped its selection process and called for the creation of new criteria for the project. The delay will set the project back by about a month, but Department of Administration spokesman Curt Yoakum said the building is still on target to be completed in 2015.
The selection committee, which meets behind closed doors, includes Senate Majority Leader Tom Bakk, DFL-Cook; former state Supreme Court Justice Paul Anderson; Sen. Ann Rest, DFL-New Hope; Sen. Dave Senjem, R-Rochester; House Majority Leader Erin Murphy, DFL-St. Paul; Rep. Matt Dean, R-Dellwood; and Rep. Raymond Dehn, DFL-Minneapolis.
The new senate office building is intended to relieve overcrowding at the State Capitol, which is on the brink of a four-year, $272 million renovation. Funding for the new office building was included in the $2.1 billion tax bill that passed the Legislature in the final hours of the 2013 session.
Note: Corrected a typo and other fixes.
State tax collections slumped in July, falling 2 percent below projections for the month.
Income tax collections were off 13 million, to $603 million. Corporate income tax receipts were down about $12 million.
Sales tax collections were a bright spot, up $22 million, or nearly 12 percent, over estimate. Total sales tax collections totaled $201 million for the first month of the new budget cycle.
State budget officials say there is nothing unusual or concerning about the revenue changes. July is a month of relatively low revenue collections, so slight variations in dollar amounts can cause dramatic swings in the percentages, said Minnesota Management and Budget spokesman John Pollard.
"It is not reflecting a large dollar amount in comparison to the entire budget," Pollard said.
The Minnesota Department of Revenue is projecting a $121 million decline in property taxes next year.
Gov. Mark Dayton and Democratic lawmakers cheered the prediction, which would be the first drop in Minnesota property taxes in a decade.
The state steered millions of extra dollars to local government aid in the most recent budget, with the expectation that the money will be passed along to the taxpayer in the form of lower property tax levies. The state will have to wait until after December, when cities and counties set next year's property tax rates, to know for sure if that happens.
Revenue Commissioner Myron Frans said his office made its projection based on prior experience, watching what counties and cities have done in the past with this sort of aid. Without the addiitonal money, he said, his office projected that local property taxes would have increased by $180 million in 2014.
Property taxes, Dayton told reporters Tuesday, are "the most unfair tax."
"People have to pay property taxes whether or not they have a job or their income's gone up or down, whether or not their business or their farm's making a profit," he said.
How reliable are these estimates? Dayton joked that the department that makes the property tax estimates isn't the same one that predicted that electronic pulltab devices would bring in enough money to fund the state's share of the new Vikings stadium.
"The division of Revenue that makes these projections is different from the one that makes the charitable gaming," Dayton joked.
Republicans, however, were skeptical.
"I think his projections on what will happen with property taxes are about as reliable as the e-pulltab projections," said Senate Minority Leader David Hann, R-Eden Prairie. "They're coming from the same source."
Hann predicted that the extra government aid will simply lead to extra local spending, not lower property taxes.
"Based on history, when you give local governments additional resources, they spend it," Hann said.
Local governments do have the option of spending that extra money on road projects or extra police or other extras around town. But Dayton said he expects most to pass the savings along to property owners.
"I would expect that local government officials will be delighted to take the additional resources that the state provides and use that to reduce the property tax burden, because they hear about it just as much as we do here," he said.
The Minnestota Legislature's newly elected Democratic majority passed a $2.1 billion package of tax increases this session, raising taxes on smokers and the wealthiest 2 percent of Minnesotans with the hope of seeing property taxes go down as a result.
"We said what we were going to do last November and the voters responded," Dayton said. "The Legislature has kept those promises."
House Minority Leader Kurt Daudt, R-Crown, called Dayton's announcement a "stunt to try to sell to the public that ... $2.1 billion in taxes is somehow a good thing."
The property tax question will be settled in February, after local communities report their new property tax rates to the state.
Gov. Mark Dayton has named four appointees to the board that will oversee the largest economic development project in state history.
Minnesota taxpayers are contributing $455 million to the Destination Medical Center Project -- the Mayo Clinic's $5.6 billion plan to transform downtown Rochester as it expands and upgrades its own campus. An eight-member board will oversee the state dollars flowing into the project.
Dayton's announced his picks for the board Tuesday: James Campbell, retired group executive vice president of Wells Fargo & Co.; Dayton's chief of staff, Tina Flint Smith, who worked with Mayo to pitch the project to skeptical lawmakers last session; Susan Rani, president and founder of Rani Engineering; and Minneapolis Mayor R.T. Rybak.
Campbell and Smith will serve six-year terms, Rani and Rybak will serve four-year terms. All will have to be confirmed by the Minnesota Senate.
Mayo has named its own representative to the board: Bill George, former chairman and CEO of Medtronic and a Mayo trustee. The eight-member board also includes Rochester Mayor Ardell Brede, Rochester City Council member Ed Hruska and a member to be selected by the Olmstead County Board.
The Legislature signed off on the Mayo funding in May, with the understanding that state funds would be used for infrastructure improvements to support the overall project. Mayo pitched the Destination Medical Center as the only way for it to stay competitive with other world-class treatment centers like the Cleveland Clinic and Johns Hopkins.
Mayo has pledged to put $3.5 billion into the project and to leverage some $2 billion in private investment to bring new restaurants, hotels and amenities to town and transform Rochester into a destination in its own right. Rochester and Olmsted County are putting in another $128 million. Clinic officials said they were having trouble recruiting and retaining the best talent to Minnesota without the civic and cultural amenities that Cleveland and Baltimore could offer.
Mayo is the largest private employer in Minnesota. When lawmakers were debating the funding, clinic officials warned that without state buy-in to the project, Mayo might have to shift its future investments to its campuses in Florida and Arizona.
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